The Federal Open Market Committee will hold its first meeting of 2025 next week and decide if it will issue another interest rate cut.
The FOMC will adjourn its two-day session Wednesday, January 29.
After its previous three sessions, the FOMC issued cuts, dropping the federal target rate collectively by 100 basis points from its peak of 5.25 to 5.5 percent to 4.25 to 4.5 percent.
Federal Reserve Chairman Jerome Powell noted after the December meeting the significant progress made on inflation, since mid-2022 when it peaked at more than 9 percent.
“The economy is strong overall and has made significant progress toward our goals over the past two years,” Powell said. “The labor market has cooled from its formally overheated state and remains solid. Inflation has moved closer to our 2 percent longer-run goal. We’re committed to maintaining our economy’s strength by supporting maximum employment and returning inflation to our 2 percent goal.”
Since the December meeting, Powell and his colleagues have received new inflation and jobs numbers from the U.S. Bureau of Labor Statistics.
The annual inflation rate ticked up in December to 2.9 percent. It was at 2.7 percent in November. On the jobs front, unemployment dropped from 4.2 percent in November to 4.1 percent in December. The economy added 256,000 jobs.
At the December meeting, FOMC members made their projections for 2025 through 2027, expecting rates to fall to 3.9 percent next year, 3.4 percent in 2026 and 3.1 percent in 2027. The 2025 projection was half a point above the September projection as well as 2026.
Participants lowered expectations for cuts in 2025 from four to two. Powell said the FOMC sees the need to move cautiously going forward and concentrate on getting inflation closer to 2 percent.
So far, the moves by the Fed has not led to lower auto loan rates. According to new numbers from Cox Automotive, the used vehicle loan rate was at 13.91 percent in early January. That was an increase from the two-year lows in December of 13.4 percent, according to Cox Automotive Chief Economist Jonathan Smoke. Rates are still behind the peak of 14.59 percent in February 2024.
